Online Reviews and Collaborative Service Provision: A Signal-Jamming Model

71 Pages Posted: 18 Apr 2015 Last revised: 12 Jul 2019

See all articles by Haoying Sun

Haoying Sun

Texas A&M University - Mays Business School

Lizhen Xu

Georgia Institute of Technology - Scheller College of Business

Date Written: April 15, 2015

Abstract

We study the provision of collaborative services under online reviews, where the service outcome depends on the effort of both the service provider and the client. The provider decides not only her own effort but also the client's, at least to some extent. The client gives the review based on his net utility upon service completion. We develop a signal-jamming model in which the provider's inherent capability or type is unobservable, and the market infers the provider type through observable signals such as the service outcome, the client review, or both. We show that compared to the benchmark case when the service outcome is observed as a signal, the client review generally leads to less effort of both the provider and the client. The review hence tends to sacrifice the service outcome in favor of the efficiency of the client's effort input. Nevertheless, when clients incorporate private information about the provider type into their reviews, service providers are better motivated to devote effort. Interestingly, we find the provider's effort choices may be either strategic complements or substitutes. With a reasonable level of informativeness, online reviews could lead to favorable performance in service effectiveness, client effort efficiency, and provider type distinguishability. Surprisingly, we demonstrate that when both the review and the outcome are available, the provider may lack sufficient incentive to devote effort, resulting in inferior distinguishability of provider types. It thus illustrates that richer information may not necessarily generate favorable strategic outcomes.

Keywords: online review, collaborative service, signal jamming, educational service, bivariate signal, strategic complements and substitutes

Suggested Citation

Sun, Haoying and Xu, Lizhen, Online Reviews and Collaborative Service Provision: A Signal-Jamming Model (April 15, 2015). Production and Operations Management, 2018, Vol. 27, No. 11, pp. 1960-1977.; Mays Business School Research Paper No. 2595073; Georgia Tech Scheller College of Business Research Paper No. 2015-15. Available at SSRN: https://ssrn.com/abstract=2595073 or http://dx.doi.org/10.2139/ssrn.2595073

Haoying Sun

Texas A&M University - Mays Business School ( email )

Wehner 401Q, MS 4353
College Station, TX 77843-4218
United States

Lizhen Xu (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

United States
404-894-4380 (Phone)
404-894-6030 (Fax)

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